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Title: Overconfidence, Underconfidence, and Welfare
Authors: Asano, Takao
Kunieda, Takuma
Shibata, Akihisa
Keywords: overconfidence
strategic complementarity
strategic substitutability
positive spillover
negative spillover
Issue Date: Sep-2014
Publisher: Institute of Economic Research, Kyoto University
Journal title: KIER Discussion Paper
Volume: 903
Abstract: Using a simple framework of Cooper and John (1988) and Cooper (1999), this paper derives the conditions under which overconfidence and underconfidence of agents lead to Pareto improvement. We show that an agent's overconfidence in a game exhibiting strategic complementarity and positive spillovers and an agent's underconfidence in a game exhibiting strategic complementarity and negative spillovers can lead to Pareto improvement.
Appears in Collections:KIER Discussion Paper (English)

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